Most college students don’t worry a great deal about building credit. In fact, the subject might not ever come up in 4 years at a typical university. The college experience is associated with being broke, living off of Ramen, and trying to study for a great career.
Even if you’re not the picture of wealth in college, you can still make important decisions. It will put you on sound financial footing much earlier in life than if you simply ignore personal finance during your time at school. Personal credit and the all-important credit score have vital ramifications for your financial future, including when or if you will be able to buy a house, whether you will be in the running for a competitive new job, how much it will cost you to borrow money and many more important life events.
Even though you probably won’t be rolling in it during your freshman year, you can still start laying the foundation for great credit. In fact, if you can develop good credit during the limitations of college, you’ll be able to do it anytime, for the rest of your life. To do so, you’ll have to understand some of the basics of personal credit. Thus equipped, you won’t have a hard time making the most of credit cards and other financial tools.
Before we get into credit cards, it’s important to note that these little pieces of plastic are not the only determining factor in your credit life. If you decide to live off-campus or in certain types of campus housing, you may have a utility bill in your name. Because you are responsible for paying for this bill, and because utilities are used before they are paid for, the way you handle this payment will go on your credit record. Pay on time and you’ll get good marks; pay late and you’ll see your young credit score drop.
The same goes for many things you borrow. Library books and some resources shared through your university may be linked to your credit if the account can be sent to collections were you to forget to return the item.
Credit cards are an important part of your burgeoning credit history. When you use a credit card to make a purchase, you are borrowing money. How much you borrow, how reliably and quickly you pay it back, and how often you borrow through different credit channels. All of these have bearing on your credit history. Be responsible and dependable and don’t take on too much debt. You should build an excellent score even before you graduate.
Basically, a credit history is a record of how responsible you are with borrowed money. Nobody can live on cash alone. This measure is helpful in letting lenders determine whether or not you should be trusted with their money. Be careful with borrowed money in college though! You’ll find that your credit history is much more supportive of your goals for the rest of your life.
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